You have permission to this article either electronically or in print as long as
author bylines are included, with a live link, and article is not changed in any way (typos, excluded). Please provide a courtesy e-mail to charles@thestockopolyplan.com telling where article was published. Defining a long-term investment in stock market.
For some “long term” would mean holding a stock position over weekend. For others, it may mean holding a security for at least 1 year for purpose of declaring a long-term capital gain, thus saving on taxes.
The rigid definition of a long-term investment in stock market would be holding a security for a minimum of 5 years, to as long as 30 years.
I’m going to tell you my definition of a long-term investment in a security by telling you a story. A true story!
My Mother worked as a teller in a small bank in Dover, New Jersey. The name of bank was called The Dover Community Bank. While working at bank (she eventually became a branch manager) she enrolled in bank’s dividend reinvestment plan, making purchases of stock through pay-roll deductions from her paycheck. She continued purchasing stock through years, having dividends from her shares in bank reinvested into more shares every quarter. By time she left bank (in early seventies) she had accumulated around 300 shares of The Dover Community Bank.
My Father, when he retired, had dividends from those shares sent home – to help ends meet. When my Dad passed away at age 80, my brother and I inherited over 7,600 shares of The Bank of New York, all originating from those 300 shares of what was once called The Dover Community Bank.
So, through this individual experience I have adopted my own opinion of what is called a long-term investment in a security. It is simply this – securities should be purchased with intent of providing dividend income to help ends meet during retirement, with understanding that no one can successfully retire without financial freedom. So every investment now in a security would be purchased with intent of holding that security (and adding to it during years) until dividend income from that security is ample enough to ease loss of income from retiring from my job. Now, I not only provide for myself during my retirement years, but will leave this earthly realm knowing that I will also be able to relieve some financial burdens for those I’ve left behind.
With this definite, concrete purpose for investing in mind, a definite, concrete plan would need to be created (and can be found in my book The Stockopoly Plan) to achieve this long-term investment goal. My Mother invested in only one stock and got lucky – a considered plan would diversify.
So if I am going to hold a security position forever, what criteria should I be looking for in that security? Certainly dividend income – that’s a given! And since I never intend to sell security, capital gains may not even be an issue (more on this later).
